Is Bush bold, or watered-down Schwarzenegger?

Commentary: Health care, energy on agenda

WASHINGTON (MarketWatch) -- As President Bush stands before Congress on Tuesday evening to give his report card on the nation, the biggest change in the state of the union is that he is no longer the undisputed decider.

Congress now has Democratic leaders, installed in part because the voters repudiated Republican policies on a host of issues, primarily the war, but also on pocketbook issues such as health care, energy and the environment, education and immigration.

Bush's State of the Union address will recognize the new political reality, emphasizing the issues that Americans care most about, the ones that helped the Democrats win back control of the House and the Senate last November.

There's one more political reality that Bush can't ignore: his lame-duck status. Rather than present the usual laundry-list of dozens of plans for the next four or eight years, this speech will be limited by design to just a few ideas that can be accomplished in the two years the president has remaining.

The president will challenge the Congress "to step up to the plate and to deal responsively and creatively with real problems that Americans care about," his spokesman, Tony Snow, said Monday.

Snow said Bush will propose "bold" new ideas on health care and energy.

The details are sketchy, but it looks like Bush's bold proposals are watered down compared with Republican California Gov. Arnold Schwarzenegger's recent initiatives on expanding health care or on combating global warming. Democrats in Congress have even bolder ideas.

Health care

The president himself previewed his health-care plan in his radio address on Saturday, proposing to create a new tax break to encourage a wider market in health insurance.

Under Bush's plan, families would get a standard $15,000 tax deduction for health insurance, with individuals getting $7,500. Depending on taxable income, the new standard deduction could be worth as much as $5,250 or as little as $0 in federal tax savings.

To help low-income families with little or no taxable income, the deduction could also be used to reduce the amount of income subject to the payroll tax.

The tax break would be available for those who get their health insurance through their job, through their union or who buy an individual policy. Anyone who received or bought a gold-plated health benefit worth more than the deduction would have to pay taxes on the excess.

The average cost of a employer-provided family policy is $11,500 a year, the administration said.

The White House estimated that 80% of taxpayers would see their taxes go down, and millions of families not covered by their employer would be able to afford to buy health insurance policy on their own.

The average tax bill for a family currently without insurance would go down by $3,350, the administration said.

But many executives, professionals and union workers could pay higher taxes because their health plan costs more than $15,000. The plan is designed to pay for itself.

The big change in the tax code would encourage an additional 5 million people to buy health insurance, the Treasury Department concluded. But critics say the plan wouldn't help the remaining 42 million Americans who have no health insurance.

"Most low- and middle-income families don't have enough income to purchase health insurance even with tax breaks," said Bill Vaughn, a senior policy analyst for the Consumers Union. For such families, a tax credit of $1,000 to $3,000 to buy a policy that costs $11,000 "is almost meaningless," he said.

Energy and global warming

Details of Bush's plans on energy are very hazy. One of his top economic advisers, Al Hubbard, said the speech "will knock your socks off" in its approach to energy independence.

Although everyone in Washington for the past 30 years has endorsed energy independence, little has been done to achieve it, notes David Sandalow, a scholar at the Brookings Institution. Conditions are ripe now, however, he said, with "the prospect of a lasting legacy to the president who makes this issue a priority. But it will take just that -- making the issue a priority. Easy rhetoric and small initiatives will not be enough."

Bush is expected to call for increased fuel efficiency for cars and trucks, the New York Times reported Monday.

In the past, the White House has rejected calls for better mileage, arguing that the smaller cars that would result wouldn't be as safe.

The corporate average fuel economy, or CAFÉ standard, has not changed since 1990, but Democrats in Congress are expected to push the administration to raise it above the current 27.5 miles per gallon.

Instead, Bush may suggest abolishing the corporate average approach and set a fuel standard for each vehicle based on its size.

Bush is also expected to address global warming, but the speech will not propose a cap or limit on the emissions of greenhouse gases, his spokesman said Monday.

"The president has always believed when it comes to climate change that the best way to achieve reductions is through innovation and to figure out ways to come up with energy sources that are going to meet our economy's constant demand for energy and at the same time do it in a way that's going to be friendly for the environment," Snow said.

Bush's legacy

This is the beginning of Bush's last chance to make his legacy in the history books something more than just the war.

State of the Union speeches are usually forgotten soon after the echoes fade in the House chamber. What's remembered is the energy, focus and political skill the president brings to making his vision come alive.

Despite having a Republican majority for most of his first six years, Bush hasn't had much success since those early tax cuts and No Child Left Behind. Remember his plan to reinvent Social Security?

And now he faces a reinvigorated Democratic Congress, as well as independent governors who are impatient with the gridlock in Washington.

Unless Bush finds a way to work more effectively with Congress, he could find himself marginalized by more creative and effective politicians at work in state houses, in Congress and on the trail to the 2008 presidential campaign. His plans could be dead soon after arrival on Capitol Hill.

And that would leave Bush as a president who cut taxes and led the nation into Iraq, and not much else.

Rex
Nutting

Rex Nutting is a columnist and MarketWatch's international commentary editor, based in Washington. Follow him on Twitter @RexNutting.

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